California

California's New Minimum Wage Is Predictably Killing Food Delivery Jobs

Pizza Hut announced plans to lay off 1,200 delivery drivers on Wednesday.

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A man holds a stack of pizza boxes against a gray background | Photo 226993235 © Aaron Amat | Dreamstime.com
(Photo 226993235 © Aaron Amat | Dreamstime.com)

A new California law will require that most food-service workers get paid at least $20 per hour starting next year.

But hundreds of pizza delivery drivers in the Los Angeles area are about to discover Thomas Sowell's famous adage that the true minimum wage is zero.

Pizza Hut announced Wednesday that it would lay off about 1,200 delivery drivers in Los Angeles, Orange, and Riverside counties, CBS News reported. Pizza Hut franchises are outsourcing delivery to third-party apps like GrubHub and UberEats as a cost-saving measure in advance of the new law taking effect.

The layoffs are likely to take effect in February, The Los Angeles Times reports, just weeks before the new, higher minimum wage hits.

California's minimum wage for all workers is already $15.50, one of the highest wage floors in the country. The new $20 per hour minimum wage applies to all employees of fast-food chains with at least 60 locations in the country.

Gov. Gavin Newsom signed the fast food worker minimum wage proposal into law in September. The law also created a new state board, the Fast Food Council, that will play a role in setting labor standards and future wage increases for many food-service jobs.

That the new wage mandate is already costing jobs should not be much of a surprise. Perhaps worse is the unseen costs in the form of jobs that will never exist in the first place. Like burger-flipping in a fast-food joint, pizza-delivery gigs are low-level employment opportunities for workers with low skills or those seeking a little extra cash. Hiking the minimum wage means some workers will earn more, but other people will effectively be priced out of the labor market.

"Labor costs account for one-third of fast-food costs, so prices will rise. McDonald's and Chipotle already have announced higher prices for next year," Reason contributor Steven Greenhut wrote last month. "For most of us, the higher prices will mean a little less pocket cash and a lot more home-cooked meals. But think about the lost opportunities for people who need them the most."